Reddit delivered another exceptional quarter. Revenue surged 61%, advertising revenue climbed 64%, net income nearly tripled and earnings easily beat Wall Street estimates. Yet the stock fell more than 9% after hours because investors focused on a single sentence in the company’s shareholder letter: “Search referrals were choppy.” In 2026, that was enough to overshadow everything else.
The reaction says as much about the internet as it does about Reddit. For years, the platform has benefited from users discovering Reddit discussions through Google Search. But Google is increasingly answering those questions itself through AI Overviews and other AI-powered search features. Investors are beginning to ask whether Reddit’s biggest growth engine also represents its biggest vulnerability.
The Quarter Was Difficult to Fault
Reddit reported second-quarter revenue of $805 million, comfortably ahead of analyst expectations of roughly $730 million and up 61% from the same period a year earlier. Advertising revenue, which remains the company’s core business, increased 64% to $762 million, reflecting continued advertiser adoption and stronger monetisation across international markets.
Profitability also improved sharply. Net income reached $253 million, up from $89 million a year earlier, while diluted earnings per share rose to $1.25, easily exceeding consensus expectations of around $0.95. Adjusted EBITDA and operating cash flow also surpassed analyst forecasts, extending Reddit’s run of rapid revenue growth and expanding margins.
The company also issued third-quarter guidance above Wall Street estimates, forecasting revenue between $860 million and $870 million.
On paper, it was another outstanding earnings report.
One Sentence Changed the Narrative
The market was not interested in what Reddit had already achieved.
Instead, investors focused on a single passage in the shareholder letter.
“These product efforts, paired with consumer marketing, helped drive daily active users and offset headwinds in users coming from search. Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter.”
That wording immediately reinforced a concern that has been building across Wall Street for months: Reddit depends heavily on Google Search to introduce new users to the platform. If Google’s AI products increasingly answer users’ questions without requiring them to click through to Reddit, the funnel that has powered Reddit’s growth becomes less reliable.
The result was immediate. Despite beating expectations across almost every financial metric, Reddit shares fell roughly 9% to 12% in after-hours trading as investors reassessed the sustainability of future user growth.
The Google Relationship Has Become More Complicated
The earnings reaction came only days after reports that Reddit was internally evaluating whether to restrict Google’s access to Reddit content for AI model training when the companies renegotiate their licensing agreement.
That creates a difficult balancing act.
Google pays Reddit tens of millions of dollars annually to license its content for artificial intelligence training, providing Reddit with a valuable high-margin revenue stream. At the same time, Google Search remains one of Reddit’s largest external sources of user acquisition.
If Reddit pushes too aggressively during licensing negotiations, it risks damaging an important commercial relationship. If it accepts the status quo, Google may continue using Reddit’s content to answer users’ questions directly inside AI-generated search results, reducing the need for users to visit Reddit itself.
It is an unusual situation in which one company functions simultaneously as Reddit’s customer, distribution partner and emerging competitive threat.
US User Growth Is Beginning to Slow
The underlying user data helps explain why investors reacted so sharply.
Global daily active users reached 130.3 million, an increase of 18% from a year earlier, driven primarily by strong international expansion. International daily active users increased 28% year over year.
The United States told a different story.
U.S. daily active users increased only modestly from a year earlier and slipped slightly compared with the previous quarter, suggesting growth in Reddit’s most valuable advertising market is beginning to flatten. Because U.S. users generate substantially more advertising revenue per person than international users, even small changes in domestic growth receive outsized attention from investors.
Management argued that investments in product improvements and consumer marketing are helping convert visitors into logged-in users. The concern is whether those efforts can fully offset weaker search-driven traffic if Google’s AI search products continue expanding.
Why This Matters Beyond Reddit
The implications extend far beyond one social media company.
Thousands of online businesses, including fintech publishers, broker comparison sites, financial education platforms and product review websites, rely on Google Search for a significant share of new visitors.
As Google increasingly answers factual questions directly through AI-generated summaries, fewer users may need to visit the original publisher.
That changes the economics of the open web.
Companies built around advertising or affiliate revenue increasingly need users to arrive directly through apps, newsletters, communities or brand recognition rather than depending almost entirely on search referrals.
Reddit is not unique in facing that challenge. It is simply one of the first major public companies whose quarterly results have made the risk visible to investors.
What Reddit Can Control and What It Cannot
Reddit can continue improving its app, encouraging users to create accounts, expanding internationally and strengthening its advertising technology.
It can negotiate more valuable AI licensing agreements and encourage users to access Reddit directly instead of relying on search engines.
What it cannot control is how Google chooses to display information inside Search.
That makes Google’s product decisions an increasingly important variable in Reddit’s own growth story.
The second quarter demonstrated that Reddit’s business remains exceptionally strong. Revenue growth exceeded 60% for the eighth consecutive quarter, profitability continues improving and advertisers remain willing to spend.
Yet Wall Street largely ignored those achievements because investors now believe the company’s future depends less on advertising execution than on a single external platform. For Reddit, the biggest question is no longer whether it can monetise its users. It is whether Google will continue sending enough of them in the first place.
